2013: Not another do-nothing year

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Congress faces the same question every December: Will it finally fix the flawed Medicare formula that threatens to massively slash doctors’ payments whenever a new year rolls around?

So far, the answer has always been “no,” and 2013 isn’t likely to be any different.

Known as the Sustainable Growth Rate, the formula has led to a miniversion of the fiscal cliff every year since 2003, when Congress began overriding it to avoid dramatic payment cuts from hitting doctors who care for seniors.

When lawmakers originally created and passed the SGR in 1997, they thought it would keep Medicare physician spending in check by tying it to inflation, along with a few other factors such as Medicare enrollment and gross domestic product growth per capita. The formula blocks physician payments from increasing by more than 3 percentage points above the previous year’s inflation rate.

At the time, no one suspected that the SGR would eventually result in the dramatic payment cuts Congress is wrestling with now. Physician spending at the time was growing steadily but not at a breakneck pace, allowing the formula to work as lawmakers intended for the first couple years.

Things started to head south in 2001, when for the first time doctors claimed more reimbursements than the SGR allowed. Congress sat back and allowed the formula to run its course that first year, letting payments drop by 4.8 percent as scheduled.

But lawmakers have averted larger and larger cuts every year since, and the problem has just gotten worse and worse.

Every time they have put off, shrunk or canceled pay cuts, lawmakers have just dug themselves into a deeper hole, since the formula works on a cumulative basis. In 2007, doctors would have seen their payments cut by 10.1 percent without a “doc fix.” That amount had risen to 21.3 percent by 2010. At the end of this year, payments could plummet 27 percent if Congress doesn’t find another temporary patch.

In the first few years of doc fixes, lawmakers made an effort to keep the hole filled, setting up a schedule to offset the extra spending by reducing payment rates in subsequent years.

But as budgetary pressures mounted, lawmakers kept pushing off the cuts and paying just enough to sidestep them for one year — a strategy that amounted to putting plywood over the hole but not filling it.

Why it could happen soon

Lawmakers say they’d like to solve the SGR once and for all. They’re tired of going through the cliffhangers year after year in which they always head off devastating payment cuts at the last minute — only to set up another cliffhanger down the road.

Last year, Congress kept doctors nervous up to the last minute, managing to pass a one-year fix just days before Christmas as part of a larger deal to extend payroll tax cuts. And sometimes, they haven’t even been able to achieve fixes for a whole year, instead passing shorter-term six-month deals.

Both Democrats and Republicans agree that the cuts would be disastrous for doctors and, subsequently, seniors if they ever went through — a rare point of consensus in a time when the parties are severely divided over how to reform Medicare. Lawmakers from both parties have proposed permanent solutions to SGR, including Pennsylvania Reps. Joe Pitts, a Republican, and Allyson Schwartz, a Democrat.

“That could be a good thing if they deal with this once and for all,” Pitts told POLITICO. “If they kick the can down the road and just solve the fiscal problem for a year or less, then it will come back again and you know, we jerk the doctors around enough.”

Rep. Sander Levin, a Michigan Democrat and the ranking member of the Ways and Means Committee, said he thinks the SGR should be negotiated with the rest of the budget, saying it’s “part and parcel” to the rest of federal spending.

“I think it’s preferable to face up to the entire set of issues rather than taking them piece by piece,” he said. “You can’t do things for a couple months.”

Why it won’t happen soon

Every year, lawmakers use apocalyptic terms to describe the prospective cuts and urge one another to come up with a permanent fix. But every year, they fail.

That’s largely because the money keeps getting in the way. After more than five years, the hole is so deep that it’s nearly impossible for Congress to agree on enough money to permanently fix the problem.

While a one-year doc fix carries a $25 billion price tag, the Congressional Budget Office said recently that eliminating the SGR altogether and filling that hole over 10 years would cost $245 billion — a hefty sum, even for the federal government.

Lawmakers almost uniformly agree that they’ll end up with another temporary fix this year, acknowledging that fiscal cliff negotiations will supersede any efforts to solve the SGR dilemma. And there’s a sense that things are out of their hands, anyway.

“Unfortunately, it’s probably all gonna be lumped together because they’re negotiating so many different things,” Pitts said.